Inflation Bets Dial Back in Treasurys

The inflation trade is taking a break on the decline in wage pressure. But the pullback is mild, a sign many investors haven't been swayed in their beliefs about higher inflation given the prospect of fiscal stimulus, rising oil and solid jobs growth.

The 10-year break-even rate is at 1.97 percentage points, versus yesterday's 1.982, which was the highest close since September 2014, according to Tradeweb. The rate has soared from a summer low of 1.36. Some analysts say the buy-TIPS-sell-Treasurys trade may be crowded.

Min Zeng

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U.S. Stocks Open Slightly Down

The opening bell has rung, and U.S. stocks begiun the seesion ever-so-slightly down. Just after the open, the Dow Jones Industrial Average is off 19 points to 19173 and the S&P 500 is down less than 1 point to 2191.

Erik Holm

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Wages Are Not Benefiting From Low Unemployment Rate

What is probably most surprising about those weak wage trends is that the unemployment rate would seem to imply that wages should be rising at a far stronger pace.

Everybody keeps saying that the tighter labor market should lead to rising wages. And they're right, but it isn't happening.

As you've no doubt read by now, the unemployment rate fell to its lowest point since August 2007. Wage growth, however, is nowhere near its rate from then.

Average hourly earnings in November were up about 2.5% from a year ago, and weekly wages were up about 2%. In August 2007, both hourly and weekly wages were up 3.9% from a year ago.

The economy is, therefore, still a very long way away from producing the kinds of wage trends that would signal a truly healthy market.

Weekly Wages Increase Just 2%

Average hourly earnings for production and nonsupervisory employees, a group that comprises 80% of the overall work force, rose 2.35% in November from a year ago, to $21.73 from $21.23. That isn't exactly great.

If you look at the weekly earnings - which I'd say are a better indication of how people actually live - it gets even worse. Average weekly earnings were $730.13 in November, up from $715.45 a year ago. That works out to a 2.05% increase.

With inflation these days running about 1.5% or so, that means the average worker's wages are barely outpacing inflation.

Paul Vigna

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Four Rate Hikes Could Be Coming Next Year

While some say the Federal Reserve won't be able to lift rates aggressively next year, others say fiscal stimulus enacted by the new presidential administration might change the equation.

Here's Paul Ashworth at Capital Economics with that view:

"A December rate hike is coming and, assuming that we see a major fiscal stimulus passed in the first half of next year, we expect an additional 100 basis points of tightening from the Fed next year, taking the fed funds target range to between 1.50% and 1.75% by end-2017."

Ben Eisen

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Doubts About 2017 Rate-Hike Pace

Shaun Osborne, chief foreign-exchange strategist at Scotiabank, said the report confirms the Federal Reserve’s case for raising U.S. interest rates this month, but raises some doubts that the Fed will be able to tighten policy aggressively in 2017.

”The Fed is locked in at this point for a December increase,” said Mr. Osborne. But the argument for more rate increases next year “would have been sounder if we’d seen a pickup in hourly earnings,” he said.

Chelsey Dulaney

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Dollar Edges Up After Jobs Report

The U.S. dollar is slightly higher after the report, holding onto its recent bout of strength over the past month.

The WSJ Dollar Index, which measures the currency against 16 peers, is up 0.04% on the day, though it remains below the multi-year highs seen at the end of last month. The dollar is up 0.3% against the Japanese yen, and the euro slid about the same against the dollar.

A strong dollar has been one factor that's constrained the flow of money in the past, causing Fed officials to think twice before lifting rates. This time around, despite the financial tightening created by a rising currency, most believe it won't stop the central bank from moving this month.

Ben Eisen

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Report Gives Fed Reason to Be 'Measured' in 2017

Gary Pollack, head of fixed-income trading at Deutsche Bank's private-wealth-management unit, is surprised at November's pullback in average hourly earnings.

"Wage inflation remains muted even as the labor market is tighter, which is a positive for bonds," he says. Still, today's report won't stop the Fed this month--though "it would support the Fed's stance to tighten in 2017 at a measured pace."

Meanwhile, he calls the bond-price gains since the report hit a selling opportunity since the market's narrative has been shifting toward higher yields. Mr. Pollack has been selling long-term bonds and moving into shorter-term debt. He expects the 10-year yield--recently at 2.419%-- to rise to the 2.75-3.0% range next year.

Min Zeng

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Forget the December Hike, It's Time to Think About 2017

Well, if you were still holding out, we'd really advise you not to bet against a Fed hike later this month. This morning's jobs report was the "last hurdle" to a hike, Aberdeen Asset Management's Luke Bartholomew said this morning, and it's "incredibly hard" to imagine what could keep a December hike from happening. The question now is what happens next year.

"For a long time markets have thought rates would rise very gradually," he wrote. "But Trump’s victory has tested that conclusion. The Fed will want to offset any significant fiscal stimulus that Trump manages to enact. There’s a good chance that Trump might view that as an attempt to undermine his plan given how hostile he’s been towards the central bank. That could lead to a showdown between president and central bank which financial markets would not take kindly.”

Paul Vigna

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Broader Measure of Unemployment Hits Lowest Since April 2008

The U.S. labor market has been one of the brightest spots in a long recovery marked by sluggish growth. But even with consistent job creation, a historically large share of Americans have opted out of the workforce and wage gains have remained below prerecession levels.

That may be changing as the labor market gets tighter, forcing employers to cast wider nets for workers, and offer better pay and perks. But there are still signs of slack.

A broad measure of unemployment and underemployment called "U-6," which includes those who have stopped looking and those in part-time jobs who want full-time positions, was 9.3% in November, down from 9.5% the prior month and the lowest level since April 2008. The rate averaged 8.3% in the two years before the recession.

Jeffrey Sparshott, Eric Morath

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Fed Rate Rise Expectations Still Intact

All told, investors are viewing this report as doing little to deter a rate increase by the Federal Reserve this month, which markets have largely priced into the market.

Traders in the fed funds futures market, used to place bets on the timing of a rate rise, show a 95% chance of an increase in December, up from 93% on Thursday, according to CME Group.

Where Did the Jobs Come From?

So who was hiring in November?

The largest gains, 63,000 jobs, came in the category labeled professional and business service, a broad category that includes everything from computer engineers to temps. Within this category, 36,000 jobs were in administrative and support services. Accounting and bookkeeping added 18,000. Computer systems design added 5,000.

Health care added 28,000 jobs.

Construction added 19,000, and that's a good sign. Most of that came in residential specialty trade contractors, which added 15,000.

No other sectors added enough jobs for the BLS to break it out in their release.

Paul Vigna

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Unemployment Rate Lowest in More than 9 Years

The jobless rate fell to a seasonally adjusted 4.6% in November from 4.9% in October. The rate is the lowest since August 2007.

The significant drop shows both that more Americans found jobs, and that over 400,000 people dropped out of the labor force.

The figure will be remembered as the unemployment rate during the month Americans elected Donald Trump president. Achieving significant improvement in the number could be difficult, as a rate below 5% is historically low. As a candidate, Mr. Trump turned a skeptical eye to the unemployment rate and often highlighted other figures, such as measures of underemployment and the share of Americans in the workforce.

Eric Morath

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November Job Creation Perfectly In-Line With 2016 Average

The 178,000 jobs created in November are almost exactly in line with the average for 2016.

Including this morning's numbers, the economy has created an average of 180,000 jobs a month so far this year. In 2015, the economy created an average of just under 230,000 jobs a month.

Paul Vigna

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Rates Extend Fall After Report

The U.S. Treasury market extended gains after the report, pushing rates lower. The yield on the 10-year note was down 0.043 percentage point at 2.417%. The yield on the 7-year fell the most, down 0.04 percentage point to 2.206%, per Tradeweb.

Gold jumped after the report. It was last up 0.44% near $11.74.90 per ounce.

Stock futures are little changed. The S&P is poised to open 0.1% lower, as is the Dow Jones Industrial Average.

Ben Eisen

Bonds,

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Labor Force Participation Rate Down a Tick at 62.7%

The labor force participation rate was 62.7%, down a tick from October's 62.8% rate, but up from last November's 62.5% rate. The employment-population ratio was also stable at 59.7%; it was 59.7% in October, and 59.4% last November.

The number of people considered "marginally attached" to the work force was up 215,000 from a year ago, totaling 1.9 million people.

Paul Vigna

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Revisions Show Slight Decrease

Revisions to the past two months show a tiny drop in the number of jobs created.

The change in total nonfarm payroll employment for September was revised up from a gain of 191,000 jobs created to a gain of 208,000. October was revised down from a gain of 161,000 jobs to 142,000 jobs.

With these revisions, employment gains in September and October combined were 2,000 less than previously reported.

Over the past three months, job gains have averaged 176,000 per month.

Ben Eisen

Jobs Report

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Wages Rise by 2.5%

Over the past year, average hourly earnings have risen by 2.5%. That's down from October's 2.8% reading,which was the strongest wage growth reading since June 2009.

Average hourly earnings for all employees on private nonfarm payrolls declined by 3 cents to $25.89 in November, following an 11-cent increase in October. Average hourly earnings of private-sector production and nonsupervisory employees edged up by 2 cents to $21.73 in November.